Eni to Acquire Tullow Oil Interest in Hewett Unit

Italian energy major Eni has signed a memorandum of understanding with UK-based Tullow Oil for the acquisition of the latter’s 52% interest in the Hewett Unit fields in the UK North Sea and related infrastructure, including the associated Bacton sub-terminal, for a cash consideration of GBP210 million.

Eni is an existing partner in the Hewett Unit and the acquisition of Tullow’s stake will raise Eni’s total interest in the unit to 89%, becoming the operator. The acquisition is part of Eni’s strategy to develop gas storage facilities in the UK and in Europe.

The UK is a net importer of gas and Eni believes that the gap between demand and supply, and therefore price volatility, will further increase during the coming years due to the continued decline in domestic gas production. The Italian company noted that the level of available storage capacity in the UK is significantly lower than the European average when compared to demand.

Eni believes that, given the characteristics and location of the Hewett Unit reservoirs and the related Bacton gas terminal, strategically located in the main access point to the UK market in close proximity to the Interconnector pipeline connecting UK with Europe, the Hewett Unit represents an attractive opportunity for the development of an offshore gas storage facility for seasonal modulation.

Eni intends to apply for a storage license in the short-term with the aim of converting certain depleted gas fields in the unit into offshore gas storage facilities. The storage facility is expected to be the biggest in UK and one of the biggest in Europe, with a working gas capacity of up to five billion cubic meters.

The memorandum of understanding forms the basis for definitive sale and purchase documentation which will be signed over the coming weeks and Eni expects the acquisition to complete by the end of 2008, once the relevant approvals have been obtained.